Lawmakers Seek to Simplify Phone Tax

Although Floridians pay some of the highest communications services tax rates in the nation, the revenue recently has been declining.

Published: Sunday, February 10, 2013 at 12:01 a.m.

Last Modified: Monday, February 11, 2013 at 2:45 a.m.

TALLAHASSEE | Every time you pay your cell phone bill, buy a prepaid phone card or pay your cable television bill, you're also paying state and local taxes that help fund cities, counties, school construction and university buildings.

This year, the combination of communications services taxes is projected to bring $1.4 billion to the state and $738 million to cities and counties. Another 50-cent per line fee provides $123 million for the operation of emergency 911 services.

And although Floridians pay some of the highest communications services tax rates in the nation — one industry analyst pegged it at fourth-highest — the revenue recently has been declining, pressuring local governments and limiting the state's ability to build and maintain schools, state college and university facilities.

Lawmakers are considering changes to clarify a system intended to be "simplified" when it was put in place barely a decade ago. Some now say it's time to streamline the system and make it more current with the rapidly changing phone, cable and communications technology.

But it will be a difficult field to navigate with the plethora of telecommunication companies and lobbyists, city and county governments and education advocates who all have a stake in the taxing system.

State Rep. Ritch Workman, R-Melbourne, said he hopes to help make the taxing system more "fair and transparent."

Currently, the chairman of the House Finance and Tax Subcommittee said, Florida taxes its communication services "12 different ways from Sunday."

For example:

There were 122 different local option communication tax rates charged in Florida last year, ranging up to 7.12 percent. Overall, Floridians paid an average of 14.21 percent in state and local taxes last year for most phone and cable services.

The state only charges 2.37 percent for residential land lines, with local governments charging an average of 5.04 percent.

There is no local communications services tax on satellite TV services, although the state imposes a 13.17 percent tax.

More than one of every four wireless devices uses prepaid services, which have been considered exempt from the communication taxes, paying only the 6 percent state sales tax rate plus any local sales taxes.

City and county governments have made the issue one of their top concerns for the 2013 Legislature.

They have seen their revenue from local communications services taxes plummet from a high of $916 million in 2008-09 to a projected $738 million for this year. The local governments say they would support streamlining the system but want to protect a revenue source that is critical for their local communities.

Cragin Mosteller, a spokeswoman for the Florida Association of Counties, said the counties were willing to work on a reform plan that ensured "counties are not harmed."

Mosteller said counties across Florida cut $3 billion in the last five years, adding that many depend on the local communications services tax to fund critical services.

"Counties that have maintained a low CST should not see their citizens penalized with rate increases or lose the ability to adjust rates should the need for additional revenues arise," he said.

Education advocates are also watching the debate closely because some of the communications services tax — including the gross receipts tax — is used to support borrowing for public school maintenance and construction, as well as for university and state college facilities.

In recent years, funding for the Public Education Capital Outlay program has all but dried up, while public schools are looking for funding to improve school safety and higher-education institutions are looking to revamp facilities for more science and technology programs.

Tax collections have been depressed in part by the Great Recession and its aftermath. But there have been clear trends in the telecommunication industry that have affected state and local revenue.

Another factor is the growing use of prepaid phone services. House analysts said there were an estimated 17.9 million cell phones or other wireless devices in Florida in 2011, with more than 5 million of those — or 28 percent — using prepaid services.

As part of the 2001 telecommunications law, prepaid services were considered exempt from state and local communications taxes, but paid the 6 percent state sales tax as well as local sales taxes.

The state Department of Revenue recently determined those increasingly sophisticated prepaid services — which now include more than basic phone service — should be subject to the communications services tax.

Lawmakers are moving bills this spring to clarify that prepaid services should only be subject to the sales tax. The Senate Communications, Energy and Public Utilities Committee unanimously approved a bill (SB 290) last week that allows the prepaid services to continue to pay the sales tax.

"We are simply modernizing our taxing system to recognize the changes in technology," said Sen. Bill Galvano, R-Bradenton, who is sponsoring the measure.

Stephanie Smith, a spokeswoman for AT&T, which supports Galvano's bill, said the bill clarifies what has been an ongoing practice in the state, while preventing consumers from facing a tax increase that could jump from an average of 7.25 percent to more than 16 percent in some communities.

"Prepaid users tend to be lower-income Americans with limited access to credit and this burden would hurt Floridians that can least afford it," she said.

She also said the clarification should "not result in less revenue" for local governments. "It represents the current and widespread practice of retailers that sell prepaid calling arrangements," she said.

Workman wants legislation that will eliminate "guesswork and gamesmanship," and leave "the same tax for everybody no matter how you are getting your communications services."

<p>TALLAHASSEE | Every time you pay your cell phone bill, buy a prepaid phone card or pay your cable television bill, you're also paying state and local taxes that help fund cities, counties, school construction and university buildings.</p><p>This year, the combination of communications services taxes is projected to bring $1.4 billion to the state and $738 million to cities and counties. Another 50-cent per line fee provides $123 million for the operation of emergency 911 services.</p><p>And although Floridians pay some of the highest communications services tax rates in the nation — one industry analyst pegged it at fourth-highest — the revenue recently has been declining, pressuring local governments and limiting the state's ability to build and maintain schools, state college and university facilities.</p><p>Lawmakers are considering changes to clarify a system intended to be "simplified" when it was put in place barely a decade ago. Some now say it's time to streamline the system and make it more current with the rapidly changing phone, cable and communications technology.</p><p>But it will be a difficult field to navigate with the plethora of telecommunication companies and lobbyists, city and county governments and education advocates who all have a stake in the taxing system.</p><p>State Rep. Ritch Workman, R-Melbourne, said he hopes to help make the taxing system more "fair and transparent."</p><p>Currently, the chairman of the House Finance and Tax Subcommittee said, Florida taxes its communication services "12 different ways from Sunday."</p><p>For example:</p><p>There were 122 different local option communication tax rates charged in Florida last year, ranging up to 7.12 percent. Overall, Floridians paid an average of 14.21 percent in state and local taxes last year for most phone and cable services.</p><p>The state only charges 2.37 percent for residential land lines, with local governments charging an average of 5.04 percent.</p><p>There is no local communications services tax on satellite TV services, although the state imposes a 13.17 percent tax.</p><p>More than one of every four wireless devices uses prepaid services, which have been considered exempt from the communication taxes, paying only the 6 percent state sales tax rate plus any local sales taxes.</p><p>City and county governments have made the issue one of their top concerns for the 2013 Legislature.</p><p>They have seen their revenue from local communications services taxes plummet from a high of $916 million in 2008-09 to a projected $738 million for this year. The local governments say they would support streamlining the system but want to protect a revenue source that is critical for their local communities.</p><p>Cragin Mosteller, a spokeswoman for the Florida Association of Counties, said the counties were willing to work on a reform plan that ensured "counties are not harmed."</p><p>Mosteller said counties across Florida cut $3 billion in the last five years, adding that many depend on the local communications services tax to fund critical services.</p><p>"Counties that have maintained a low CST should not see their citizens penalized with rate increases or lose the ability to adjust rates should the need for additional revenues arise," he said.</p><p>Education advocates are also watching the debate closely because some of the communications services tax — including the gross receipts tax — is used to support borrowing for public school maintenance and construction, as well as for university and state college facilities.</p><p>In recent years, funding for the Public Education Capital Outlay program has all but dried up, while public schools are looking for funding to improve school safety and higher-education institutions are looking to revamp facilities for more science and technology programs.</p><p>Tax collections have been depressed in part by the Great Recession and its aftermath. But there have been clear trends in the telecommunication industry that have affected state and local revenue.</p><p>Increasing competition has driven down prices and therefore tax collections on those services. Others suggest that market saturation — nearly everyone owns a phone — is going to limit future growth.</p><p>Another factor is the growing use of prepaid phone services. House analysts said there were an estimated 17.9 million cell phones or other wireless devices in Florida in 2011, with more than 5 million of those — or 28 percent — using prepaid services.</p><p>As part of the 2001 telecommunications law, prepaid services were considered exempt from state and local communications taxes, but paid the 6 percent state sales tax as well as local sales taxes.</p><p>The state Department of Revenue recently determined those increasingly sophisticated prepaid services — which now include more than basic phone service — should be subject to the communications services tax.</p><p>Lawmakers are moving bills this spring to clarify that prepaid services should only be subject to the sales tax. The Senate Communications, Energy and Public Utilities Committee unanimously approved a bill (SB 290) last week that allows the prepaid services to continue to pay the sales tax.</p><p>"We are simply modernizing our taxing system to recognize the changes in technology," said Sen. Bill Galvano, R-Bradenton, who is sponsoring the measure.</p><p>Stephanie Smith, a spokeswoman for AT&T, which supports Galvano's bill, said the bill clarifies what has been an ongoing practice in the state, while preventing consumers from facing a tax increase that could jump from an average of 7.25 percent to more than 16 percent in some communities.</p><p>"Prepaid users tend to be lower-income Americans with limited access to credit and this burden would hurt Floridians that can least afford it," she said.</p><p>She also said the clarification should "not result in less revenue" for local governments. "It represents the current and widespread practice of retailers that sell prepaid calling arrangements," she said.</p><p>Workman wants legislation that will eliminate "guesswork and gamesmanship," and leave "the same tax for everybody no matter how you are getting your communications services."</p><p>"That would be my goal, if that is at all possible," he said.</p>